Tag: failure to file

Some of our tax relief clients are concerned about the criminal implications of their case. They want to know how we plan on helping them dig their way out of their tax debt, but they also want to know if they are going to be able to avoid a criminal investigation or conviction. Some people (for various reasons) have multiple years of unfiled tax returns, and these are the clients who typically worry the most. The IRS calls these people “non-filers.”

Do non-filers have to be concerned about being prosecuted for tax crimes? Yes, they do.

Most people think of tax crimes as falling into one of the following categories:

abusive tax schemes

identity theft

money laundering

tax refund fraud

These are the types of tax crimes that get the most publicity. However, it is important to know that non-filers can go to prison too. The threshhold for “tax evasion” is lower than you might think. Of course the IRS does not have the resources nor the desire to prosecute every taxpayer who fails to file. In fact, most of the time, the IRS simply resorts to the Substitute for Return program rather than involving Criminal Investigation. But you can’t rule it out! The rule of thumb is to file your return every year, even if you know you aren’t going to be able to pay.

Taxpayers often call us in a panic because they have received a threatening letter from the IRS and they are one step away from a wage garnishment or a bank levy. Our clients come from a variety of experiences and backgrounds, but they all have one thing in common: they owe the IRS and can’t pay what they owe. And many, if not most of our clients, also have missing tax returns.

What are the typical repercussions for failing to file a tax return? The IRS will send notices asking the taxpayer to file, maybe assign a Revenue Officer to secure the return, possibly file a Substitute for Return, assess a failure to file penalty, etc. As for criminal prosecution, I’d say it is pretty uncommon. In fact, failing to file on its own is not criminal; there must be some additional affirmative act to elevate the misconduct to a felony.

I was surprised to hear about Lauryn Hill’s tax troubles today. She has been charged with failing to file her 2005, 2006, and 2007 tax returns. None of the reports say what the “extra something” was in Hill’s case. My best guess for now is that she simply fits the profile of people they like to prosecute as a public spectacle (i.e., a downward trending musician with an extra large tax bill) and the IRS isn’t about to let her get away with it.

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